SIA won’t be Tata Group’s co-pilot in bid for Air India

Singapore Airlines (SIA) won’t partner the Tata Group in its bid for state-owned Air India, according to people with knowledge of the matter. Tata had hoped to rope in SIA and make the bid through their Vistara joint venture. The Singaporean carrier has, however, waived their no-compete clause, allowing Tata to go ahead with a solo bid for the stricken carrier. Tata had been trying to persuade SIA to join it on the Air India bid for months. A key reason for SIA’s reluctance is said to have been the long-term funding that Air India will need to return to viability, said the persons.

Tata Sons, the holding company of the conglomerate, can’t bid without SIA’s approval and its waiver of the no-compete clause. Tata could bid on its own or through its AirAsia India unit, in which it has been increasing its stake, lowering that of joint venture partner AirAsia Bhd. While there are some legal challenges regarding this latter avenue, the group can work around them, executives said.

EoIs from Three Entities

The government is expected to take the process forward after shortlisting bidders for the airline by the end of the month, said the people cited above.

“Putting in a bid through a particular entity is just a formality and not a challenge,” said a group executive. “The real work starts when EY will begin the due diligence on the bid once the government gives us the access to the data room.”

SIA declined to comment. “Singapore Airlines does not comment on investment opportunities, including in India,” said a spokesperson. Vistara and Tata Sons didn’t respond to queries.

AirAsia Bhd declined to comment.

Like its global peers, the Singaporean carrier has been hit by the pandemic, forcing it to cut pay and retrench staff. Experts said SIA would want to pump funds into itself rather than commit funds to Air India.

The Tata Group had been keen to make the bid through Vistara, which is also a full-service airline, and would have meant operational synergies. Tata Sons holds 51% of Vistara and SIA owns 49%. The company is registered as Tata SIA Airlines Ltd.

AirAsia Bhd is also understood to have released Tata from their no-compete clause, leaving the latter free to bid for an airline in the budget space. The Air India privatisation programme also includes Air India Express, its regional international low-fare arm. Tata Sons is raising its stake in AirAsia India to 87% from 51%. The partners have been in talks to part ways as AirAsia Bhd plans to exit loss-making businesses in India and Japan.

The Air India divestment has received expressions of interest from three entities, including the Tata Group. One of the options being considered is getting a new group entity to bid for the business. The Tata Sons M&A team and CFO Sourav Agarwal have been examining the financial contours of a possible transaction.

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